Conglomerate Mergers: An Acceptable Phenomena?
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This paper has been an attempt to examine conglomerate motivations for growth through merger activity. I have also sought to discuss theoretically how recent merger activity has affected the competitive process. To substantiate my research efforts, I attempted to present the acquisition history of one corporation. I discussed their motivations for growth and analyzed any affects their behavior may have had on the competitive process, in reference to my findings. My research suggested that there are many motives for growth through merger. Foremost are synergism, economies of scale and scope, and the financial benefits that can be enjoyed when companies merge. I also learned that many of the motivations for firms engaging in acquisition activities, can be detrimental to society. Theoretically, I found contradictory discussions on merger activity and the competitive process. Most scholars cite mutual forbearance, reciprocity, and cross-subsidization when discussing conglomerate merger activity. Yet, many scholars disagree on the effects this phenomena has had on competition. Some economists argue that conglomerate mergers have had little if any effect on the competitive process. Others contend that there has been indisputable damage caused by merger activity. My analysis of United Technologies Corporation has helped substantiate my opinion on the effects of merger activity. After much r~search and employment with UTC-Automotive I have concluded that the merger activities of United Technologies have had ill-effects on the competitive process. According to this case study, cross-subsidization and use of economic power have damaged many industries and individuals. Currently, their behavior suggests that merger activity has not even been beneficial to their extended financial situation.